Buy India Cements; target of Rs 143: Motilal Oswal

“India Cements' (ICEM) 1QFY13 operating performance was above estimated with EBITDA of INR2.8b (v/s est of INR2.3b) led by better realizations and higher IPL profits. However, forex loss and higher tax restricted adj. PAT to INR748m (-27%YoY, +15% QoQ v/s est INR856m).”

“Volumes grew just by 2.9% YoY (-8.4% QoQ) to 2.38mt (v/s est 2.45mt), despite South India volumes growing by ~9%. Realizations were up 5.1%QoQ (+7.6% YoY) at INR4,464/ton (v/s est INR4,326/ton). Revenues grew 13.7% YoY (+7.6% QoQ) to INR12b (vs/ est INR11.6b). Revenues from IPL were ahead of estimates at INR1.2b (v/s INR848m in 1QFY12 v/s est INR900m), whereas ship freight revenues were at INR125m (v/s est INR100m). Higher than expected realizations and in line cost resulted into positive surprise in profitability. EBITDA margins improves to 23.1% (v/s est 19.5; +380bp QoQ, +20bp YoY) and EBITDA grew by14.9% YoY (-29.1% QoQ) to INR2.8b (v/s est INR2.3b). This translates into blended EBITDA/ton of INR1,166/ton (v/s est INR927/ton v/s INR828/ton in 4QFY12). In 1QFY13, there was an exceptional expense of INR200m representing one time cost pertains to IPL auctions, details of which are not clear. It is acquiring another ship of 52,489 DWT for USD16m, taking total fleet size to 3 ships.”

“We are downgrading our consol. EPS for FY13 by ~5% to INR11.4 and FY14 by 1% to INR15.5, despite upgrade in EBITDA, as we factor in for lower volumes, Fx loss and higher tax. The stock is valued at 5.5x FY14 EPS (extreasury stock), 3.7x FY14E EBITDA and USD53/ton (at 15.1MT capacity on pro-rata basis). Maintain Buy,” says Motilal Oswal research report.

Institutional holding more than 40% in Indian cos

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